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tv   Wall Street Week  FOX Business  January 20, 2018 3:00am-3:30am EST

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we'd love to hear it! send me an e-mail or go to our website -- strangeinheritance.com. good night. >> announcer: from fox business head quarters in new york city, the new "wall street week." maria: welcome to "wall street week," the program that analyzes the week that was and helps position you for the week ahead. i'm maria bartiromo. glenn hutchins is my special guest. but first connell has the headlines. reporter: markets reaching another milestone with the dow closing above 26,000 for the first time ever. the dow surging more than 300 points thanks to better than expected earnings from the likes of jpmorgan chase and united
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health. all three indexes finishing in the green. but one big dow component went in the other direction and that was general electric. g.e. hitting a 6-year low. a $6 billion charge related to their insurance operations. the company says it's considering all of its options including a possible breakup. g.e. stock losing 10%, and it's down 40% the last 12 months. the volatile ride known as bitcoin dropping more than 20% tuesday forcing the cboe to temporarily halt trading on its futures exchange. it dropped below $10,000 before rebounding. the news comes amid the
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announcement that governments will be cracking down. apple announced a $2,500 stock granted for most of its employees worldwide and are expected to contribute $350 billion to the economy the next 10 years. they will build a second corporate campus and paying a record $38 billion in taxes when it brings home a boatload of cash from overseas. amazon announcing it narrows its list of candidates down to 20 cities. it's expecting to spend $5 billion in the area it choose and hire more than 50,000 people. of the remaining 20 locations, more than a quarter are along the northeast corridor between boston and washington, d.c. maria: the dow jones industrial
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average closing above 26,000 for the first time ever wednesday. just nine trading days before it closed above 25,000. so this is the perfect time to hear from my special guest, north island co-founder glenn hutchins is here with us. when you see something like that, 24,000, 25,000, 26,000, what do you think in terms of market valuations and the backdrop driving this market? glenn hutchins: the tax bill will generate by some good estimates 7-10% earnings. but if you look at valuations over a longer-term time period, they are very high right now. there is the potential that they are dangerously high or moving into that territory. i don't think we are on the
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precipice of something. because there is a new sugar high ingested by the markets from the thanks reform. but sugar highs pass pretty quickly for anybody who has children and reality sets in. maria: these are important points you make. can you really call it a sugar high when we know it's actually adding to earnings? you and i were around in 1999 when everything was going up because you had x number of hits to a website. but here you are talking about savings on a corporate level that will be added to the earnings. you said 7-10%. there are experts like deutsche bank that say earnings will be up 12% and corporate earnings on the s & p 500 are expected to be
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up 20%. isn't that a fundamental backdrop and not necessarily a sugar high? >> i don't think so. the cbo, congressional budget office thinks we'll add $1.5 trillion to the national debt as a result of this tax bill. even the dynamic estimates get you to a trillion. and that's before interest. because you have to pay interest on that debt you borrowed. so we are somewhere between $1.4 to $1.7 trillion of added debt. you are taking a post money, borrowing it and putting it on the government balance sheet and handing that over to corporations in the foirnl of -- in the form of earnings. in the near term you get increased corporate earnings. but in the longer term you have
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to pay that back. maria: in terms of this market move, you never know what's on the horizon. would it be the federal reserve that he raises rates too many times because they see the economy getting better, winding down that balance sheet as a reason to disrupt this rally that's been in place now for a year? what would it be that actually turns this -- you said this is dangerous. >> i said long term potentially. there is a famous -- this time many different. only fools try to predict these things. but two things could happen. one is the stimulus causes inflation to overshoot and the economy catches up from the long-term drag financial crisis. labor markets get hot and wages go up.
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that's a classic cycle. work your way through equity-based bubbles as opposed to debt fuel problems is a much easier thing to do. we live in a perilous world. north korea, middle east, all these issues going on. we are going to switzerland next week and there will be a lot of the conversation about that at the world economic forum. what i just told you about valuations comes to me from some of the world's largest allocators of capital. they understand this, and they are prepared to act when the problem hits. in other words, a lot of people think they can get off the
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moving train before it crashes. maria: is there anywhere to hide? glenn hutchins: not bitcoin. maria: glenn hutchins, we are back in one minute. >> announcer: did bitcoin go >> announcer: did bitcoin go bust this week?
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maria: it was quite the week for bitcoin, the crypto currency trading below $10,000 after hitting $20,000. it started to slide shortly add jamie dimon told me this. let me ask you about bitcoin. that was a community made that it was a fraud. >> which i regret making. the bitcoin was what the
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governments were going to fear that bitcoin gets really big. maria: in an interview with the financial times, glenn hutchins was called the first establishment investor who took a deep dive on bitcoin. can you tell us your position? >> my primarily interest, i have some etfs that have expose our to the counsel. but my primary interest is in companies that use bitcoin technology to revolutionize the way we move value around the world like we used the internet to revolutionize the way we move information, voice and video and commerce around the world. and so what's the most of important thing? information and value.
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maria: you can move money. it's not free because there are transaction fees. you can move money and do it among musclely. >> not anonymously. usethe' cost of a trust is why costs are so high from moving money around. since you and i have to trust each other intermediaries get to insert that trust, they take await fraud risk and custody risk and they charge pore doing that. maria: is that why the big banks were initially sceptical on bitcoin because it's removing them? glenn require's like the interest -- glenn hutchins: it's like the internet was in the 90s. we are now beginning to create
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engineering solutions that can move that just like the point snement, the math solution and engineering solutions. we have the math solution and now we are beginning to have the engineering solutions. the. now we are moving out to address the credit cared and remittance market and machine to machine payments. and building the infrastructure. then those come snrits to come up with business models that solve customer problems. that's 5-10 years away. this is a small, nascent industry that has a chance to be transformative but has to do a lot of work. the bitcoin price is a distraction. people are looking at the wrong thing. they are look at historic value, the gold equivalent instead of the means features of it.
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and bitcoin could be the wrong solution. bitcoin could end up to be beta max and some on the early could turn out to be the right answer. maria: how do we know which one it should be? glenn hutchins: we don't. can you take that technology and turn it into a solution that solves an important customer problem and allows you to build a problem around it? are you going to be pets.com or google. i think it's very, very important for this to work inside the framework. if you go back to the early days of the internet and computer technology there was pie in the sky thinking this would get rid of commerce step it's always been out there as a parallel thread in technology. but the banks as regulated
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entities, deposit-taking, lending organizations will always be bulwarks of the system. the bitcoin technologies will allow us to address the parts of the businesses that aren't in that regulated sector. payments, remittances. they can work in collaboration with the regulated parts of the industry to become a part of legitimate financial system. maria: i think part of the reason bitcoin sold off is people are worried about heavier regulation. people say why would i tone one of these crypto currencies when they are not backed by the faith and credit of the government. glenn hutchins: there ought to be smart regulation of this industry. bitcoin is like the various currencies are more like
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industrial metals. bit coins more like corp than gold. people buy and sell corp. but the reason why copper is valuable is because it's used in wiring homes and has industrial applications. tin and zinc have industrial applications. bitcoin solutions get implemented companies will increase their value. maria: stay with us. we'll find out where glenn is finding opportunity. >> announcer: the markets continue to hit unchart territory. territory. so how is glenn
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maria: we are talking to glenn hutchins. you are a titan when it comes to investing. we know your background. particularly when it comes to financial services and technology. you are relatively new firm, north island, is scaling that up and acquiring companies, technology used in financial services. where are you finding opportunity? glenn hutchins: we are building up five platform companies in scale businesses that operate at the intersection of financial services and technology. the first investment was a trading technologies company and we infused capital to buy knight capital and we are combining the two companies and creating one
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of the world's largest electronics marketers. my partner is the chairman. it's a team effort. but the -- and so we believe that has -- what that is is a company with cutting edge technology, high frequency technology pointed in the right direction which is market making. 270 markets trade electronically around the world. maria: i don't think they had a down day. glenn hutchins: they had very few. they built a phenomenal business and we are pleads to be their partners. then we are building up three or four other of those platforms such as software payments, and other verticals like that.
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the idea it's not a private equity fund, it's five separate companies we'll hold and manage, operating at scale at the intersection of financial services and technology. maria: when you look at the industry, financial services and technology, how does it change in the coming five years? tell us how it grows. glenn hutchins: there are massive changes. induced mostly by technology. so financial services has from the beginning of time been an industry most of susceptible to technological disruption. almost everything it does can be digitized. so the -- now with this massive pace of technological change, where you have the mobility, it's a lot of things people do in terms of their financial services can be done on these
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devices. where you are introducing artificial intelligence and later quantum computing into the cloud. you can have a lot of analyst is and intensive activity happening there, where you are also seeing significant advances in the way in which we compute so you address your computing differently with artificial reality. people can have consultations with advisors. so the whole -- then high-frequency trading technologies used for market making. all of these changes in the way in which we work with our technology and what our technology does for us will hit very early on financial services, fundamentally transform. and that's not to mention the
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bitcoin telling we were talking about. our view is to find a segment fairly disrupted by this. harness one of the technologies for competitive advantage and use it to build a business for the longer term. maria: within financial services? glenn hutchins: within financial services. we only want to operate in areas where we have fundamental domain expertise in which we can select a very small number of bits in which to concentrate our risk and focus our management attention. maria: glad to see
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maria: time for a look at some of the market events next week that could affect your money. the manufacturing pmi and the
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price index is out web existing home sales it out and durable goods numbers. we'll see if we get another 3% growth number on gdp. we have big names coming out like halliburton and netflix and texas instruments. meanwhile there are reports out there of possible breakup of general electric. the beleaguered stock is down 40% in the last 12 months. it will be reporting earnings wednesday. next week i'll be live from the world economic form in davos, switzerland. tune in for a one-hour special edition of "wall street week." plus i'll see you sunday morning.
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catch me live, 10:00 a.m. eastern. that will do it for us on "wall street week." i'll see you next time. >> i'm bob massi. for 35 years, i've been practicing law and living in las vegas, ground zero for the american real-estate crisis. but it wasn't just vegas that was hit hard. lives were destroyed from coast to coast as the economy tanked. now it's a different story. the american dream is back. and nowhere is that more clear than the grand canyon state of arizona. so we headed from the strip to the desert to show you how to explore the new landscape and live the american dream. i'm gonna help real people who are facing some major problems, explain the bold plans that are changing how americans live, and take you behind the gates of properties you have to see to believe. at the end of the show,

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